Property Tax Comparisons Among Kansas Localities and Select Cities of the United States

Transcription

1 Research Report Property Tax Comparisons Among Kansas Localities and Select Cities of the United States May 2006 Arthur P. Hall, Ph.D. Executive Director Center for Applied Economics University of Kansas School of Business Prepared for:

2 I. Key Findings This study uses hypothetical homestead, commercial, and industrial properties to accurately compare property tax burdens across 118 Kansas localities, over decade-by-decade intervals, from 1975 to The hypothetical properties, and the research method used, in this study replicate those employed in the sixth edition of the 50-State Property Tax Comparison Study: Payable Year 2005, produced by the Minnesota Taxpayers Association (in cooperation with the member states of the National Taxpayers Conference). This research strategy makes it possible to compare Kansas localities with other localities across the United States by leveraging the quality research undertaken by the Minnesota Taxpayers Association. The data and calculations in this study document that: Relative to other localities in the United States, Kansas localities imposed high property tax burdens on business properties and, depending upon locality, moderate-to-low property tax burdens on residential properties. Indeed, since 1989, on a locality-by-locality and value-forvalue basis, the Constitution of Kansas has mandated a property tax burden on real business property that is at least 117 percent higher than the burden on residential property; the personal property components of the Kansas property tax system further increase the business-to-residential disparity. (See Tables 1 and 2.) The 2006 Kansas legislature passed HB 2583, and sent it to Governor Sebelius for her signature. This legislation exempts from property taxation newly acquired business machinery and equipment. If this legislation becomes law, it will, over time, significantly reduce the Kansas business property tax burden relative to other localities in the United States, all else equal. (See Table 3.) Kansas localities differ significantly with regard to the total property tax rates they impose on taxpayers. Among the 118 localities represented in this study, there is a tax burden disparity on like property of up to $ per $1,000 of assessed property value. (See Chart 1.) The property tax reforms enacted in 1985 and 1986 may have acted as a catalyst to the decade-long labor productivity lag in Kansas that began about (See the August 2005 Kansas, Inc. study titled A Brief History of the Kansas Economy, , and citations therein, for documentation of the labor productivity lag.) Comparing the 1985 and 1990 property tax burdens on the hypothetical properties in this study reveals that, on average, among the 118 localities, homesteads experienced property tax increases of 357 percent; commercial properties experienced increases of 298 percent; and industrial properties experienced increases of 44 percent. Seven localities experienced reduced property tax burdens on the industrial property; six of those reside in Johnson County. The post-reform tax burden increases have tended to persist. (See Tables 4-6.) From 1985 to 2005, 90 percent of the localities in this study experienced a relative reduction in the share of property tax levies dedicated to public school funding (when properly accounting for State levies). This outcome implies that the levies dedicated to city or county government have grown as a share of the total property tax levies. (See Table 7.)

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4 II. Kansas Property Taxes Payable in 2005 Wichita, the most populous city in Kansas, had moderate residential property taxes and high business property taxes, when compared to the most populous city in each of the other states. Yet, Wichita had low property taxes when compared to dozens of other population centers within Kansas. Higher business-related assessment rates in combination with the personal-property component of the Kansas property tax system drove the high-ranking business property tax liabilities. Chart 1 indicates the relatively low tax-rate position of Wichita among Kansas localities; it also illustrates the relative dispersion of property tax rates (mills) among the 118 Kansas localities included in this investigation. The localities, listed by name in many of the tables below, include all Kansas cities of the first class; all cities of the second class with populations of 10,000 or more; and the county seat of each Kansas county, if not otherwise included in the sample. Chart 1: Relationship of Property Tax Rates and Property Tax Bases for 2005, Select Kansas Cities 5.50 Smith Center Anthony Total Property Tax Rates for 2005 (Logarithmic Form) Gove Larned Fredonia Mound City Westmorland Pratt Concordia Arkansas City Dodge City KCK / Wyandotte Hutchinson Topeka Leavenworth Hays Olathe Manhattan Lenexa Salina Wichita Shawnee Ulysses Burlington Lawrence Overland Park Prairie Village Merriam Property Tax Base for 2005 (Logarithmic Form) Source: League of Kansas Municipalities, Kansas Tax Rate and Fiscal Data Book, 2005 Edition. Note: Mill levels and assessed valuations are represented in logarithmic form merely to facilitate exposition. 2

5 Chart 1 reveals a general pattern to the dispersion of property tax rates: Localities in Kansas with smaller property tax bases tend to have higher overall property tax rates (although the tendency is more pronounced in this select sample than it is for the universe of Kansas localities). Among the sample localities with tax rates in the top quartile, almost two-thirds of them reside in western Kansas (specifically, the North West and South West Economic Development Regions defined by the Kansas Department of Commerce). The tax rate difference between Merriam and Smith Center equals mills, or $ for each $1,000 of assessed property value. The tax rate difference between Overland Park and Kansas City, Kansas equals about $57 per $1,000 of assessed property value. Taxpayers in Fredonia (a city of the second class) pay a total tax rate of about 147 mills, which happens to equal the median rate paid in all Kansas cities of the third class. The tax rate difference between Wichita and Fredonia equals about 33.6 mills. Tables 1 and 2 provide a context for using Wichita and Larned as benchmarks for relating sample localities in Kansas to select localities across the United States. The data in Tables 1 and 2 came from the sixth edition of a nationwide property tax comparison study conducted by the Minnesota Taxpayers Association (MTA), in cooperation with other member states of the National Taxpayers Conference. The study implements a research approach that generates, as closely as possible, a consistent comparison of inter-jurisdictional property tax liabilities, given the many different aspects associated with property tax administration across localities. Specifically, the Minnesota Taxpayers Association created 13 hypothetical properties and placed those properties in different cities so as to calculate property tax liabilities on the specific properties, using local property tax law and local assessment practices. Tables 1 and 2 list the hypothetical properties. The indicated percentage of personal property, plus other types of assets, is in addition to the listed real-property value. (See the Appendix for a more detailed table of asset types and a discussion about the research methods used for the study and a list of the localities studied.) Table 1 reports the calculated tax liability on each hypothetical property listed for the most populous city in Kansas (Wichita) and the most populous city in each of the states contiguous to Kansas. The ranks compare theses five cities with the largest cities in each of the 50 states (plus the second largest cities in Illinois and New York Aurora and Buffalo to counter-balance the unique practices in Chicago and New York City.) Table 1 shows that Wichita and Kansas City, Missouri imposed high-ranking business property taxes in both a national and a regional context. Wichita imposed moderate homestead property taxes in a national context, but not necessarily in a regional context. Wichita ranked 11 th highest among the 53 large-city localities included in the MTA study with regard to the ratio of effective tax rates on a $1 millon commercial property (real property only) and a median-valued homestead property. (In the Kansas case, industrial real property would yield the same ratio.) Denver had a much higher commercial-to-homestead ratio than Wichita, but Denver commercial taxpayers had a 33 percent lower property tax liability and owners of a $150,000 home had a 57 percent lower property tax liability. The difference between Wichita and Denver with regard to median-valued homes helps illustrate an important point about effective property tax rates. An effective tax rate equals the taxpayer s tax liability divided by the value of the tax base. Since Kansas law provides for a $20,000 3

6 Table 1: Property Tax Ranks and Liabilities among 53 Urban Localities across the 50 States, Represented Cities in Kansas and Contiguous States, 2005 Property Type Rank Tax Liability Rank Tax Liability Rank Tax Liability Rank Tax Liability Rank Tax Liability Median-Valued Homestead in Locality* 50 1, , , , ,832 $150,000 Homestead 28 1, , , ,094 $300,000 Homestead 33 3, , , , ,187 $600,000 Apartment Complex (5% Personal) 35 8, , , , ,130 $100,000 Commercial (20% Personal) 14 3, , , , ,510 $1,000,000 Commercial (20% Personal) 15 32, , , , ,105 $25,000,000 Commercial (20% Personal) , , , , ,619 $100,000 Industrial (50% Personal) 10 4, , , , ,370 $1,000,000 Industrial (50% Personal) 11 43, , , , ,696 $25,000,000 Industrial (50% Personal) 11 1,089, ,113, , , ,410 $100,000 Industrial (60% Personal) 8 5, , , , ,014 $1,000,000 Industrial (60% Personal) 9 52, , , , ,140 $25,000,000 Industrial (60% Personal) 10 1,301,824** 9 1,311, , , ,003,504 Ratio Measures (using effective tax rates):*** Ratio Ratio Ratio Ratio Ratio $1M Commercial to Median-Value Homestead $1M Commercial to $150,000-Value Homestead Important Note: The rankings for Wichita do not include the refundable 20% income tax credit for machinery and equipment property taxes available through Kansas law. * Median homestead values are reported as: Wichita $106,300; Kansas City $157,100; Oklahoma City $115,700; Denver $248,400; Omaha $137,300. ** The published report distributed by the National Taxpayers Conference contains a calculation error that incorrectly ranks Wichita as 8th (with a tax liability of $1,323,085) rather than the corrected statistics reported here. *** Real property only. Source: National Taxpayers Conference, "50-State Property Tax Comparison Study: Payable Year 2005," April 2006 Wichita, Kansas City, Oklahoma City, Denver, Omaha, Kansas Missouri Oklahoma Colorado Nebraska Table 2: Property Tax Ranks and Liabilities among 50 Rural Localities across the 50 States, Represented Towns in Kansas and Contiguous States, 2005 Property Type Rank Tax Liability Rank Tax Liability Rank Tax Liability Rank Tax Liability Rank Tax Liability $70,000 Homestead 5 1, ,335 $150,000 Homestead 7 3, , , ,861 $300,000 Homestead 7 6, , , , ,721 $600,000 Apartment Complex (5% Personal) 9 14, , , , ,015 $100,000 Commercial (20% Personal) 1 5, , , ,296 $1,000,000 Commercial (20% Personal) 1 57, , , , ,964 $25,000,000 Commercial (20% Personal) 1 1,431, , , , ,095 $100,000 Industrial (50% Personal) 1 7, , , , ,080 $1,000,000 Industrial (50% Personal) 1 76, , , , ,799 $25,000,000 Industrial (50% Personal) 1 1,909, , , , ,982 $100,000 Industrial (60% Personal) 1 9, , , , ,668 $1,000,000 Industrial (60% Personal) 1 90, , , , ,676 $25,000,000 Industrial (60% Personal) 1 2,267, , , , ,897 Ratio Measure (using effective tax rates):* Ratio Ratio Ratio Ratio Ratio $1M Commercial to $150,000-Value Homestead Important Note: The rankings for Larned do not include the refundable 20% income tax credit for machinery and equipment property taxes available through Kansas law. * Real property only. Source: National Taxpayers Conference, "50-State Property Tax Comparison Study: Payable Year 2005," April 2006 Larned, Boonville, Hollis, Walsenburg, Mullen, Kansas Missouri Oklahoma Colorado Nebraska 4

7 homestead exemption against the State s school mill levy, Kansas has a (slightly) progressive homestead property tax; that is, the effective tax rate increases as home values increase. The MTA lists a median-valued home in Wichita at $106,300 and in Denver at $248,400. The lower Kansas home value generated the lower tax liability reported in Table 1. However, the effective tax rate in Wichita equaled percent versus the percent rate in Denver. For most other categories listed in Table 1, for each locality, taxpayers with different tax liabilities due to different property values experience the same effective tax rate. For example, each Wichita commercial property listed in Table 1 paid an effective tax rate of percent and each Denver commercial property paid an effective tax rate of percent. Table 2 replicates the same exercise of Table 1 for what the MTA defines as a typical rural city in each state (based primarily on tax rate levels). Back in 1995, for the first edition of the 50- State Property Tax Comparison Study, MTA picked Larned as the typical rural city for Kansas, based on input from an individual in the Kansas Department of Revenue s Division of Property Valuation. That selection was a mistake, perhaps based on a misprint in the 1994 Kansas Tax Rate and Fiscal Data Book (published by the League of Kansas Municipalities), which listed total levies in Larned as mills rather than the more correct figure of about 180 mills. Larned, home to several State of Kansas properties that are exempt from property taxation, was never typical. Nevertheless, the data is faithfully reported in Table 2 as it appears in the latest MTA study. For 2005, within the sample of this Kansas study, Fredonia (county seat of Wilson County) represented a better candidate for the typical rural city in Kansas. Table 2 shows that Larned imposed property tax liabilities, across each asset type, that significantly exceeded those in the typical-rural-city sample of the states contiguous to Kansas. The states that had rural homestead property taxes higher than those posted in Larned tended to be in New York, Connecticut, New Jersey, Illinois, Wisconsin, and Texas. As with the large-city sample reported in Table 1, the rural Oklahoma locality (Hollis) reported in Table 2 tended to have the lowest property tax liabilities in the five-state region. (If Fredonia replaced Larned in Table 2, it would show Kansas as dropping to a rank of about twelfth for homesteads and retaining the highest rank for commercial and industrial properties.) Readers must note a significant caveat to the rankings in Tables 1 and 2. The MTA study focused on property tax systems only. This focus meant that the MTA study took no account of the refundable income tax credit provided by Kansas law to offset the property tax liability imposed on the commercial and industrial machinery and equipment sub-class of personal property. (Note, too, that the MTA study took no account of liability-offsetting provisions in other states that existed outside of the property tax system proper.) For 2005, the Kansas income tax credit equaled 20 percent. Since the credit was refundable meaning that the State wrote a check to the taxpayer for the entire credit due it had the same economic effect as assessing the machinery and equipment sub-class of property at 20 percent rather than the 25 percent provided by the Constitution of Kansas. (See the discussion on property tax law below.) Table 3 provides an industrial-property comparison, for each Kansas locality included in this study, of the difference between the property tax liability that resulted from the MTA procedure and the liability that the MTA would have reported if Kansas law imposed an assessment percentage on machinery and equipment of 20 percent instead of 25 percent, thereby defining the bottom-line impact of the refundable income tax credit. Table 3 also reports the liabilities that would have derived from exempting the commercial and industrial machinery and equipment 5

8 sub-class of personal property from taxation the property tax reform for newly acquired business machinery and equipment passed by the Kansas legislature (HB 2583), and sent to Governor Sebelius for her signature, at the time of this writing. Table 3 organizes the data into the economic development regions defined by the Kansas Department of Commerce and then alphabetically sorts the localities by county name and city name, respectively. Table 3: Property Tax Liabilities for 2005 among 118 Kansas Localities, Using Different Assumptions about the Tax Treatment of Commercial and Industrial Machinery and Equipment, $1 Million Industrial Property (50% Personal Property) Minnesota Taxpayers MTA less Exempt Rank Among Kansas Sample Association Refundable Machinery Refundable Exempt County City Procedure Credit and Equipment MTA Credit M&E East Central Region Douglas Lawrence 40,903 38,249 27, Franklin Ottawa 63,631 59,604 43, Johnson Gardner 47,916 44,632 31, Johnson Leawood 42,623 39,702 28, Johnson Lenexa 43,689 40,694 28, Johnson Merriam 34,979 32,581 22, Johnson Olathe 45,690 42,559 30, Johnson Overland Park 38,462 35,826 25, Johnson Praire Village 36,490 33,989 23, Johnson Shawnee 41,675 38,819 27, Leavenworth Lansing 47,368 44,060 30, Leavenworth Leavenworth 51,065 47,499 33, Miami Paola 54,609 51,185 37, Wyandotte Kansas City 61,346 57,294 41, North Central Region Chase Cottonwood Falls 77,468 72,559 52, Clay Clay Center 69,257 65,192 48, Cloud Concordia 66,124 61,592 43, Dickinson Abiliene 50,297 47,014 33, Ellsworth Ellsworth 72,640 68,139 50, Geary Junction City 61,620 57,842 42, Jewell Mankato 63,946 59,587 42, Lincoln Lincoln 64,184 59,485 40, Lyon Emporia 58,602 54,814 39, Marshall Marysville 61,163 57,197 41, Mitchell Beloit 69,912 65,816 49, Morris Council Grove 51,089 47,604 33, Ottawa Minneapolis 60,041 56,122 40, Pottawatomie Westmoreland 37,807 35,139 24, Republic Belleville 75,263 70,386 50, Riley Manhattan 45,850 42,793 30, Saline Salina 46,232 43,373 31, Wabaunsee Alma 50,925 47,041 31, Washington Washington 60,491 56,189 38, North East Region Atchison Atchison 59,624 55,895 40, Brown Hiawatha 50,861 47,546 34, Doniphan Troy 49,053 45,987 33, Jackson Holton 45,189 41,197 25, Jefferson Oskaloosa 61,374 57,539 42, Nemaha Seneca 45,885 43,001 31, Osage Lyndon 56,486 52,962 38, Shawnee Topeka 55,180 51,528 36,

9 Table 3 (Cont.): Property Tax Liabilities for 2005 among 118 Kansas Localities, Using Different Assumptions about the Tax Treatment of Commercial and Industrial Machinery and Equipment, $1 Million Industrial Property (50% Personal Property) Minnesota Taxpayers MTA less Exempt Rank Among Kansas Sample Association Refundable Machinery Refundable Exempt County City Procedure Credit and Equipment MTA Credit M&E North West Region Cheyenne St. Francis 40,228 37,434 26, Decatur Oberlin 67,571 63,423 46, Ellis Hays 44,109 40,989 28, Gove Gove 36,052 33,121 21, Graham Hill City 74,043 69,318 50, Logan Oakley 77,136 72,888 55, Norton Norton 61,386 57,397 41, Osborne Osborne 74,326 69,618 50, Phillips Phillipsburg 71,411 66,883 48, Rawlins Atwood 56,442 51,789 33, Rooks Stockton 70,184 65,213 45, Russell Russell 69,017 64,258 45, Sheridan Hoxie 57,173 53,328 37, Sherman Goodland 55,929 52,217 37, Smith Smith Center 104,250 98,238 74, Thomas Colby 58,326 54,548 39, Trego WaKeeney 84,137 79,329 60, Wallace Sharon Springs 62,127 57,872 40, South Central Region Butler El Dorado 57,210 53,619 39, Chautauqua Sedan 46,608 42,228 24, Cowley Arkansas City 64,201 59,827 42, Cowley Winfield 57,357 53,449 37, Elk Howard 66,373 61,830 43, Greenwood Eureka 68,938 64,580 47, Harper Anthony 75,493 70,108 48, Harvey Newton 46,699 43,260 29, Kingman Kingman 63,742 59,975 44, Marion Marion 68,449 64,255 47, McPherson McPherson 50,568 47,210 33, Reno Hutchinson 57,113 53,305 38, Rice Lyons 68,618 64,393 47, Sedgwick Derby 50,184 46,919 33, Sedgwick Wichita 43,569 40,734 29, Sumner Wellington 67,288 62,925 45, South East Region Allen Iola 60,719 56,849 41, Anderson Garnett 59,046 55,164 39, Bourbon Ft. Scott 58,068 54,395 39, Cherokee Columbus 50,204 47,005 34, Coffey Burlington 44,549 41,957 31, Crawford Girard 51,319 48,062 35, Crawford Pittsburg 51,208 47,958 34, Labette Oswego 78,506 73,660 54, Labette Parsons 67,952 63,757 46, Linn Mound City 50,542 47,308 34, Montgomery Coffeyville 64,973 60,676 43, Montgomery Independence 62,577 58,438 41, Neosho Erie 56,159 51,781 34, Wilson Fredonia 65,941 61,820 45, Woodson Yates Center 66,430 61,944 44,

10 Table 3 (Cont.): Property Tax Liabilities for 2005 among 118 Kansas Localities, Using Different Assumptions about the Tax Treatment of Commercial and Industrial Machinery and Equipment, $1 Million Industrial Property (50% Personal Property) Minnesota Taxpayers MTA less Exempt Rank Among Kansas Sample Association Refundable Machinery Refundable Exempt County City Procedure Credit and Equipment MTA Credit M&E South West Region Barber Medicine Lodge 66,104 61,697 44, Barton Great Bend 54,724 50,700 34, Clark Ashland 65,934 60,710 39, Comanche Coldwater 81,253 76,512 57, Edwards Kinsley 79,243 74,449 55, Finney Garden City 55,040 51,651 38, Ford Dodge City 62,142 58,076 41, Grant Ulysses 36,091 33,370 22, Gray Cimmeron 62,022 58,039 42, Greeley Tribune 64,693 59,918 40, Hamilton Syracuse 57,776 54,061 39, Haskell Sublette 43,132 40,040 27, Hodgeman Jetmore 92,814 87,517 66, Kearny Lakin 42,492 39,809 29, Kiowa Greensburg 58,860 54,680 37, Lane Dighton 79,207 74,515 55, Meade Meade 62,611 58,389 41, Morton Elkhart 47,562 44,088 30, Ness Ness City 52,180 48,455 33, Pawnee Larned 76,373 71,600 52, Pratt Pratt 74,848 70,102 51, Rush LaCrosse 76,792 71,740 51, Scott Scott City 74,472 70,127 52, Seward Liberal 48,301 44,871 31, Stafford St. John 81,596 76,841 57, Stanton Johnson City 47,274 44,293 32, Stevens Hugoton 43,654 40,867 29, Wichita Leoti 71,031 66,238 47, Source: Author s calculation using data from the League of Kansas Municipalities, Kansas Tax Rate and Fiscal Data Book, 2005 Edition and the Kansas Department of Revenue, Division of Property Valuation, Kansas Real Estate Ratio Study, Comparing Table 3 with the like industrial property classification in Tables 1 and 2 reveals how Wichita and Larned compare under different legal treatment of commercial and industrial machinery and equipment, all else held equal. Accounting for the Kansas law that provided a 20 percent refundable income tax credit against the property tax liability on machinery and equipment, Wichita s tax-liability rank would have dropped from eleventh to fourteenth; Larned would have retained its top-rank by a margin of $9,445. Under a scenario in which machinery and equipment became exempt from property taxation, Wichita s tax-liability rank would have dropped from eleventh to twenty-eighth; Larned s rank would have dropped from first to fourth. 8

11 Another noteworthy aspect of Table 3 concerns the shifting ranks of Kansas localities under the scenario of no property tax on machinery and equipment. Removing this sub-class of property from the property tax base would increase the influence of a locality s appraisal practices on the value of the real property subject to the legal assessment percentages. III. An Historical Perspective on the Kansas Property Tax System Property tax systems have three fundamentally interrelated components: tax rates, assessment rates, and property values. Lawmakers establish the tax rates and assessment rates. Appraisers, often fallible or poorly trained, working in markets with fragmented information, must estimate property values. The integrity and accuracy of property appraisals represents an important practical aspect of property tax administration. The variability of front-line appraisal practices makes property tax systems difficult to compare. Kansas, like most states, has a storied history with the administration of its property tax most of it related to the property appraisal process. The Constitution of Kansas (Article 11, Section 1) requires the legislature to provide for a property tax system that has a uniform and equal rate of assessment and taxation, a requirement that necessarily presumes accurate property appraisals. Kansas has a poor historical record in this regard. For example, widespread discontent with the administration of the property tax resulted in a 1953 law that established the Kansas Citizens Commission on Assessment Equalization. Commenting on the November 1954 report from that Commission, John D. Garwood, Professor of Economics at Fort Hays State University, said: The findings cogently point up the fact that the inequities resulting from faulty assessment throughout all levels of government in the state have completely undermined the property tax structure. The decadence found in the administration of the tax was worse than the critics had alleged. 1 Matters did not improve much following the Commission s 1954 report until the situation created enough political pressure to affect the major reforms implemented in Chart 2 tells the story sufficiently, and provides a foundation for understanding the historical data reported in Tables 4-8. Chart 2 illustrates, for the select Kansas localities and the years chosen for this study, the average median assessment-to-sale ratio for residential properties and commercial/industrial properties; it also illustrates the average coefficient of dispersion (COD) measures that match to the median ratios. An assessment-to-sale ratio measures the appraised value of a property divided by the price it sold for on the open market. Since a sale price is the best metric available for true market value, an assessment-to-sale ratio of 1 (or 100 percent) represents the ideal. The median ratio represents the median of all of the assessment-to-sale ratios collected in a given locality, in a given time period. The COD is a measure of uniformity; it measures the average amount of deviation from the median assessment-to-sale ratio for a given sample. The ideal COD value of zero indicates no dispersion, and thus perfect uniformity. More generally, lower COD values indicate greater uniformity of assessment, and higher COD values indicate less uniformity of assessment. The Division of Property Valuation of the Kansas Department of Revenue collects and calculates ratio and COD statistics annually, and reports them by county. 1 John D. Garwood, The Kansas Citizens Examine Their Property Tax, National Tax Journal, Vol. 9(3), 1956, p Glenn W. Fisher, The History of the Property Tax in Kansas, in Report of the Governor s Tax Equity Task Force, State of Kansas, December 1995, pp

12 Chart 2 shows that in 1975 the localities in this study had average median assessment-to-sales ratios of 17.1 percent for residential properties and 23.7 percent for commercial/industrial properties, indicating that property tax appraisers were valuing properties about 80 percent below the fair market value, as prescribed by law. More importantly for the Constitution s uniform and equal requirement, the localities experienced an average residential COD of 48.2 percent and an average commercial/industrial COD of 54.3 percent. This commercial/industrial COD indicates, for example, that owners of such properties on average faced appraisals of as much as 54.3 percent above or 54.3 percent below the median ratio. This dispersion was not uniform. Chart 2: Simple Averages of Median Sales Ratios and Coefficients of Dispersion, Residential Properties and Commercial/Industrial Properties, 118 Kansas Localities, Select Years Sales Ratio and COD Values (%) Res. Median Res. COD C/I Median C/I COD Source: Author s calculation using data from Kansas Department of Revenue, Division of Property Valuation, Kansas Real Estate Ratio Study," various years. Note: Due to a time lag, year 2004 ratio data are used throughout the study to estimate 2005 property tax liabilities. In 1985, the quality of sales ratios worsened relative to 1975, as did the degree of uniformity. This was the year that the Kansas legislature passed a law mandating reappraisal of all property and submitted a Constitutional amendment to the voters of Kansas creating a new classification system for taxable property. The amendment passed in Reappraisal and the new classification system took effect in

13 The 1990 segment of Chart 2 shows that the mandated reappraisal substantially improved the integrity of the fair market value requirement of the law and the uniform and equal requirement of the Constitution. However, the interrelated changes created by reappraisal and the new property classification system had material consequences for taxpayers property tax liabilities. Tables 4-8 quantify Kansas taxpayers experience during the years depicted in Chart 2. For internal consistency, the Tables present select property types used by the MTA study discussed in Section II and the Appendix. The next section digests the relevant changes in law that matter for Tables 4-8. A discussion of the noteworthy aspects of each table follows the Law section. Kansas Property Tax Law Relevant for this Study As discussed above, the Constitution of Kansas requires the legislature to provide for a uniform and equal rate of assessment and taxation. It also provides a list of items that are exempt from property taxation and gives the Kansas legislature the authority to separately classify specific items of property (so long as the items are taxed uniformly by class). The uniform and equal requirement applies to the definition of the property tax base; local units of governments within Kansas may set their own tax rates (unless restricted by State statute). From January 1964 through 1988, Kansas law said that all real and tangible personal property which is subject to general property taxes shall be assessed uniformly and equally at thirty percent (30%) of its justifiable value. In November 1964, the citizens of Kansas amended the Constitution to exempt household goods and personal effects not used for the production of income. In 1985, a law passed that required the reappraisal of real property. A related amendment to the Constitution of Kansas passed in November 1986 that established a substantial new property classification system. The application of the new classification system and the results of reappraisal took place in January The new classification system implemented the following schedule of assessment percentages (abbreviated here): o Single- and multi-family residential property: 12% o Real commercial and industrial property: 30% o Commercial and industrial machinery and equipment: 20% o Merchant s and manufacturer s inventories: Exempt In 1992, an amendment to the Constitution of Kansas modified, effective January 1993, the 1989 schedule of assessment percentages as follows: o Single- and multi-family residential property: 11.5% o Real commercial and industrial property: 25% o Commercial and industrial machinery and equipment: 25% 11

14 In 1997, the Kansas legislature passed a law (K.S.A x) to allow for an exemption for homesteads from the statewide school levy (20 mills). For 2005, the exemption equaled $20,000 of appraised value. In 1998, the Kansas legislature passed a law (K.S.A ,206) to allow for an income tax credit against property tax paid on commercial and industrial machinery and equipment. Per a 2002 amendment, the credit for 2005 equaled 20 percent of the property tax paid on this sub-class of personal property. The income tax credit is a refundable credit, meaning that a taxpayer will receive the entire sum due, even if it results in a negative income tax liability. A Discussion of Tables 4-8 Tables 4-6 provide a time series of property tax liabilities for three types of assets defined in the MTA study (see Appendix) a $150,000 homestead, a $1 million commercial property (with personal property worth 20 percent of the asset s real property), and a $1 million industrial property (with personal property worth 50 percent of the asset s real property). This procedure allows for a perfectly inflation-adjusted comparison of the property tax liabilities that existed in each Kansas locality, given the laws and appraisal practices existing at the time. For each year and each selected locality, Tables 4-6 list, for their respective asset type, (1) the property tax liability indicated by a county s median assessment-to-sales ratio, (2) the tax-liability rank of each locality among the 118 localities listed, and (3) the dollar value of the average deviation from the median tax liability, as indicated by a county s coefficient of dispersion. 3 (Tables 4-8 sort the localities by Kansas Department of Commerce Economic Development Regions and then alphabetically by county name and city name, respectively.) The tax rates (mill levies) used to calculate the property tax liabilities in Tables 4-6 are those reported by the League of Kansas Municipalities in their annually-published Kansas Tax Rate and Fiscal Data Book. The total mill levies reported in this source represent average mill levies; that is, the League derives the rates by dividing total property tax revenue by assessed property values, not by summing all applicable statutory mill levies. This procedure diminishes the information content of the levies for certain localities, like Manhattan and the large cities in Johnson County. The precise location of an asset in these areas can have meaningful property tax implications. For example, Manhattan locations on the Pottawatomie County side of the border can face lower mill levies than those on the Riley County side of the border. Similarly, Paula D. Moege, an experienced appraiser in the Kansas Division of Property Valuation, has shown that (depending on school district and other special taxing districts) composite statutory property tax levies can vary by up to 37.4 mills in Leawood; 39.4 mills in Lenexa; 20.9 mills in Olathe; 28 mills in Overland Park; and 42.1 mills in Shawnee. 4 Tables 4-6 do not attempt to account for these variations, and use the League s published rates for historical consistency. The most striking aspect of Tables 4-6 is the significant increase in property tax liabilities that took place from 1985 to 1990, across each asset type. On average, among the 118 localities, the homestead property experienced an increase of $1,880; the commercial property experienced an 3 Mathmatically, some COD measures could imply a negative tax liability. The author has not attempted to correct for this rare outcome. 4 Analysis produced in March 2006 as a result of private correspondence. 12

15 increase of $36,007; and the industrial property experienced an increase of $18,688. With the exception of the industrial property in Coffeyville (Montgomery County) and six Johnson County localities, no locality experienced a reduction in property tax liability on any of the asset types. Tables 4-6 also show that most localities sustained the increase in property tax liabilities well after the transition from reappraisal and the new classification system. Many localities reduced property tax liabilities in 2005 relative to However, with the exception of the industrial property, no locality has 2005 tax liability levels close to 1985 levels. For the homestead property, Mankato, at 109 percent, had the lowest percentage increase from 1985 to 2005; Medicine Lodge had the highest at 1,113 percent. For the commercial property, Gove, at 52 percent, had the lowest percentage increase from 1985 to 2005; Medicine Lodge had the highest at 530 percent. The explanation for why a locality would register a drop in tax liability on the industrial property but not the commercial property relates to the classification amendment passed in 1986, which exempted inventories. Of the 118 localities, 24 show a drop in tax liability on the industrial property in 2005 relative to 1985; one-third of those localities reside in Johnson County. Table 7 reports for each year the city, county, and school mill levies as a share of the total mill levies reported by the Kansas League of Municipalities. In cases like Johnson County, where a locality may cross several school districts, the primary school district in the year 1975 is assigned to the locality. For 1995 and 2005, the State school levy is added to each locality s school district levy. Since Table 7 does not list special district levies, the totals will rarely add to 100 percent; the average is about 94 percent. In rare cases, perhaps because of tax-increment financing for economic development projects, the shares will total more than 100 percent. The most noteworthy aspect of Table 7 is the widespread decline in school shares when one compares 2005 with Over 90 percent of the localities represented recorded a drop in their school levy as a share of the total levy. This outcome implies that city, county, and special district levies grew as a share of total property tax levies. However, many different local conditions can explain the shifting of shares in a given year. From 1995 to 2005, far fewer localities (38 percent) registered a drop in the school levy as a share of the total levy. Table 8 reports for each locality and each year the ratio of effective tax rates for a $1 million commercial property relative to a $150,000 homestead. Since the ratios use the effective tax rates on real property only, they provide an indicator of the relative share of the property tax paid by businesses and homesteads. Notice that each locality had ratios much closer to one in 1975 and As designed, the classification amendment of 1986 significantly increased the assessment percentage of business properties relative to homesteads, thereby increasing the ratios reported for The constitutional amendment of 1992 (effective 1993) set the last change in legal assessment percentages, so the variation in ratios between 1995 and 2005 resulted from the variation in appraisal practices in the different localities. 13

16 Table 4: Property Tax Liabilities for Select Years among 118 Kansas Localities, $150,000 Homestead Net Property Tax Liability (Median Case) Rank Among Kansas Sample Range of Tax Liability Around Median (+ or -) County City East Central Region Douglas Lawrence ,184 1,998 1, Franklin Ottawa ,566 2,264 2, Johnson Gardner ,469 1,998 2, Johnson Leawood ,621 1,966 1, Johnson Lenexa ,797 2,100 1, Johnson Merriam ,829 2,042 1, Johnson Olathe ,377 2,283 2, Johnson Overland Park ,599 1,839 1, Johnson Praire Village ,793 2,090 1, Johnson Shawnee ,784 2,060 1, Leavenworth Lansing ,123 1,641 2, Leavenworth Leavenworth ,483 1,912 2, Miami Paola ,514 2,209 2, Wyandotte Kansas City 1, ,535 2,992 2, North Central Region Chase Cottonwood Falls ,978 2,302 3, Clay Clay Center ,579 2,346 2, Cloud Concordia ,385 3,003 3, , Dickinson Abiliene ,208 1,927 2, Ellsworth Ellsworth ,441 2,235 2, Geary Junction City ,196 2,206 2, Jewell Mankato 1,473 1,206 2,677 2,683 2, ,178 1, Lincoln Lincoln 902 1,169 2,765 2,744 3, , Lyon Emporia ,744 2,328 2, Marshall Marysville ,957 2,333 2, Mitchell Beloit 1, ,457 2,565 3, Morris Council Grove ,358 2,191 2, Ottawa Minneapolis ,458 2,254 2, Pottawatomie Westmoreland ,383 1,768 1, Republic Belleville 1, ,701 2,541 3, ,158 1, Riley Manhattan ,217 2,146 1, Saline Salina ,337 1,790 1, Wabaunsee Alma ,860 1,657 2, Washington Washington ,842 2,247 2,

17 Table 4 (Cont.): Property Tax Liabilities for Select Years among 118 Kansas Localities, $150,000 Homestead Net Property Tax Liability (Median Case) Rank Among Kansas Sample Range of Tax Liability Around Median (+ or -) County City North East Region Atchison Atchison ,701 2,074 2, Brown Hiawatha ,167 2,258 2, , Doniphan Troy ,244 1,521 1, , Jackson Jefferson Nemaha Holton Oskaloosa Seneca ,125 2,431 1,621 2,384 2,467 1,755 2,494 2,442 1, Osage Lyndon ,130 1,819 2, Shawnee Topeka ,720 2,842 2, North West Region Cheyenne St. Francis ,776 2,118 1, Decatur Oberlin ,931 2,263 3, Ellis Gove Hays Gove ,106 3,156 2,174 1,653 2,085 1, Graham Hill City ,265 3,067 3, Logan Norton Oakley Norton ,299 2,945 2,057 2,508 2,861 2, Osborne Osborne ,828 2,290 3, Phillips Rawlins Rooks Russell Phillipsburg Atwood Stockton Russell ,791 2,793 2,353 2,377 2,646 2,376 2,396 2,185 3,022 3,027 3,363 3, Sheridan Hoxie ,938 2,392 2, Sherman Smith Thomas Trego Goodland Smith Center Colby WaKeeney 685 1, ,255 2,897 2,006 2,972 2,203 2,804 2,293 2,961 2,510 4,268 2,529 3, , , Wallace Sharon Springs ,968 2,359 3,

18 Table 4 (Cont.): Property Tax Liabilities for Select Years among 118 Kansas Localities, $150,000 Homestead Net Property Tax Liability (Median Case) Rank Among Kansas Sample Range of Tax Liability Around Median (+ or -) County City South Central Region Butler El Dorado ,329 2,406 2, Chautauqua Sedan ,892 2,686 2, Cowley Arkansas City ,732 2,486 2, Cowley Winfield ,950 2,665 2, Elk Howard ,141 2,525 3, Greenwood Eureka ,416 2,491 2, Harper Anthony ,702 2,895 3, Harvey Newton ,636 2,296 2, Kingman Kingman ,137 2,096 2, Marion Marion ,443 2,060 2, McPherson McPherson ,549 2,210 2, Reno Hutchinson ,315 2,313 2, Rice Lyons ,510 2,185 2, Sedgwick Derby ,923 1,913 2, Sedgwick Wichita ,093 1,790 1, Sumner Wellington ,645 2,584 2, South East Region Allen Iola ,805 2,277 2, Anderson Garnett ,529 2,431 2, Bourbon Ft. Scott ,012 2,624 2, Cherokee Columbus ,120 1,667 2, Coffey Burlington ,440 1,619 1, Crawford Girard ,791 2,085 2, Crawford Pittsburg ,267 2,062 2, Labette Oswego ,017 2,916 3, Labette Parsons ,318 2,569 2, , Linn Mound City ,263 1,789 2, Montgomery Coffeyville 925 1,131 3,085 2,592 2, , Montgomery Independence ,926 2,561 2, Neosho Erie ,539 2,218 2, Wilson Fredonia ,579 2,702 2, Woodson Yates Center ,044 2,842 3,

19 Table 4 (Cont.): Property Tax Liabilities for Select Years among 118 Kansas Localities, $150,000 Homestead Net Property Tax Liability (Median Case) Rank Among Kansas Sample Range of Tax Liability Around Median (+ or -) County City South West Region Barber Medicine Lodge ,184 2,843 2, Barton Great Bend ,676 2,379 2, Clark Ashland ,701 2,899 3, , Comanche Coldwater 1, ,011 3,088 3, Edwards Kinsley ,442 3,212 3, , Finney Garden City ,345 1,985 2, Ford Dodge City ,353 2,500 2, Grant Ulysses ,482 1,518 1, Gray Cimmeron ,134 2,112 2, Greeley Tribune ,595 2,683 3, Hamilton Syracuse ,987 2,097 2, Haskell Sublette ,209 1,664 1, Hodgeman Jetmore 1, ,962 2,555 4, Kearny Lakin ,665 1,961 1, Kiowa Greensburg ,633 2,209 2, Lane Dighton ,830 3,290 2, Meade Meade ,810 2,603 2, Morton Elkhart ,988 1,882 2, Ness Ness City ,652 3,159 2, , Pawnee Larned ,455 3,011 3, Pratt Pratt ,594 2,115 3, Rush LaCrosse ,038 3,167 3, Scott Scott City ,533 2,192 3, Seward Liberal ,244 1,958 2, Stafford St. John ,014 2,753 3, Stanton Johnson City ,726 1,472 2, Stevens Hugoton ,186 1,363 1, Wichita Leoti ,005 3,054 3, Source: Author s calculation using data from the League of Kansas Municipalities, Kansas Tax Rate and Fiscal Data Book, various editions, and the Kansas Department of Revenue, Division of Property Valuation, Kansas Real Estate Ratio Study," various years. 17

20 Table 5: Property Tax Liabilities for Select Years among 118 Kansas Localities, $1 Million Commercial Property (with 20% Personal Property) Note: The 2005 tax liabilities include the 20% refundable income tax credit for machinery and equipment allowed by Kansas law. Net Property Tax Liability (Median Case) Rank Among Kansas Sample Range of Tax Liability Around Median (+ or -) County City East Central Region Douglas Lawrence 12,932 10,574 42,403 34,576 29, , ,787 3,175 4,096 Franklin Ottawa 12,703 15,079 54,126 33,744 45, ,331 17,003 6,727 8,785 4,262 Johnson Gardner 10,532 11,799 37,033 34,406 33, ,826 1,512 11,638 4,091 5,953 Johnson Leawood 9,635 10,296 24,301 33,849 29, ,670 1,319 7,637 4,025 5,295 Johnson Lenexa 10,271 10,343 26,951 36,172 30, ,780 1,325 8,470 4,301 5,427 Johnson Merriam 10,591 11,064 27,434 35,169 24, ,836 1,418 8,622 4,182 4,345 Johnson Olathe 11,129 10,537 35,641 39,313 31, ,929 1,350 11,201 4,674 5,676 Johnson Overland Park 10,413 10,682 23,980 31,664 26, ,805 1,369 7,536 3,765 4,778 Johnson Praire Village 9,914 11,613 26,887 35,998 25, ,718 1,488 8,450 4,280 4,533 Johnson Shawnee 10,335 10,838 26,754 35,480 29, ,791 1,389 8,408 4,218 5,177 Leavenworth Lansing 10,873 12,251 38,370 25,801 32, ,610 2,750 5,907 6,169 3,385 Leavenworth Leavenworth 13,989 10,855 44,886 30,066 35, ,357 2,437 6,910 7,188 3,649 Miami Paola 10,098 11,103 49,196 33,567 39, ,384 5,685 3,597 9,266 Wyandotte Kansas City 14,747 14,291 47,639 51,918 43, ,522 4,592 8,151 8,576 9,148 North Central Region Chase Cottonwood Falls 8,545 10,786 57,614 36,475 55, ,455 1,071 12,633 13,139 17,477 Clay Clay Center 15,350 14,589 46,696 34,343 51, ,721 7,701 7,714 4,693 10,679 Cloud Concordia 14,096 12,545 66,998 53,878 46, ,087 7,590 11,196 7,226 14,560 Dickinson Abiliene 15,956 11,986 44,717 21,875 35, ,284 3,409 11,090 7,428 9,149 Ellsworth Ellsworth 12,022 10,958 44,607 39,113 52, ,967 2,818 8,671 8,861 17,250 Geary Junction City 11,950 7,848 47,419 38,547 44, ,726 1,586 8,621 5,697 7,557 Jewell Mankato 26,601 19,967 47,785 46,615 44, ,132 6,776 15,276 7,224 6,689 Lincoln Lincoln 13,231 12,608 59,352 53,416 43, ,610 2,891 27,161 10,892 7,918 Lyon Emporia 12,477 12,095 55,537 38,182 41, ,371 3,411 13,935 8,048 5,632 Marshall Marysville 12,547 15,588 54,477 46,891 43, ,094 10,964 9,466 9,730 3,624 Mitchell Beloit 16,264 14,060 51,799 50,269 51, ,081 2,454 22,319 9,880 14,826 Morris Council Grove 12,882 10,285 47,691 41,496 35, ,548 5,534 18,244 7,949 4,225 Ottawa Minneapolis 13,071 10,711 54,184 46,048 42, ,436 2,815 6,450 4,370 11,250 Pottawatomie Westmoreland 10,861 9,474 50,574 23,954 26, ,343 1,898 7,527 3,018 4,294 Republic Belleville 15,630 12,995 52,526 48,806 53, ,845 5,624 12,746 7,210 11,269 Riley Manhattan 13,734 10,819 45,519 38,878 32, ,561 1,295 4,850 2,389 6,135 Saline Salina 12,070 11,971 45,342 24,483 33, ,163 1,713 6,527 6,655 7,298 Wabaunsee Alma 12,230 10,325 41,373 34,740 33, ,754 6,981 5,521 9,734 8,341 Washington Washington 13,926 15,260 56,797 43,390 41, ,332 6,015 18,785 12,265 6,138 18

21 Table 5 (Cont.): Property Tax Liabilities for Select Years among 118 Kansas Localities, $1 Million Commercial Property (with 20% Personal Property) Note: The 2005 tax liabilities include the 20% refundable income tax credit for machinery and equipment allowed by Kansas law. Net Property Tax Liability (Median Case) Rank Among Kansas Sample Range of Tax Liability Around Median (+ or -) County City North East Region Atchison Atchison 16,825 16,662 66,654 37,414 43, ,564 4,920 12,381 10,532 3,539 Brown Hiawatha 15,491 14,728 58,053 35,365 36, ,160 7,407 7,044 3,692 11,861 Doniphan Troy 11,296 14,350 41,809 26,089 35, ,189 2,889 5,144 3,570 5,978 Jackson Holton 12,975 13,703 41,539 40,896 27, ,362 3,589 16,788 3,264 5,692 Jefferson Oskaloosa 14,667 12,108 49,517 42,100 44, ,460 3,238 5,501 5,004 8,055 Nemaha Seneca 15,196 12,929 34,866 27,603 33, ,820 3,731 8,948 4,050 10,661 Osage Lyndon 11,555 13,806 41,936 35,352 40, ,266 8,065 9,726 6,106 2,580 Shawnee Topeka 13,955 15,768 53,548 46,776 39, ,778 2,824 9,033 8,848 5,656 North West Region Cheyenne St. Francis 13,157 11,134 41,640 36,084 27, ,700 3,215 1,575 2,378 5,186 Decatur Oberlin 14,850 10,273 34,260 42,635 49, ,990 2,070 18,217 4,179 6,915 Ellis Hays 10,073 8,872 42,182 39,159 30, , ,650 5,647 2,717 Gove Gove 15,278 15,273 62,966 33,280 23, ,243 2,640 9,066 3,241 10,913 Graham Hill City 10,762 12,256 76,585 54,282 53, ,101 2,074 27,444 3,607 7,722 Logan Oakley 10,657 10,941 65,053 42,400 58, ,713 2,077 7,080 5,950 5,785 Norton Norton 12,059 14,429 69,982 49,046 43, ,892 4,561 14,007 8,661 7,229 Osborne Osborne 14,809 17,586 50,551 47,626 53, ,859 5,358 17,137 9,437 10,138 Phillips Phillipsburg 12,724 13,391 82,130 45,702 51, ,558 12,362 19,841 13,554 13,272 Rawlins Atwood 10,374 13,403 61,389 40,586 35, ,860 3,121 14,188 5,292 7,901 Rooks Stockton 14,323 9,031 45,897 51,114 48, ,485 3,289 4,537 10,502 22,360 Russell Russell 11,031 11,343 36,832 39,624 48, ,460 2,016 9,820 5,047 5,219 Sheridan Hoxie 8,273 17,837 71,989 55,791 40, ,808 22,272 17,743 3,751 Sherman Goodland 12,652 11,312 47,964 38,320 39, ,462 1,307 3,846 5,094 4,915 Smith Smith Center 18,865 21,985 50,827 43,483 77, ,354 14,463 4,833 8,678 20,794 Thomas Colby 9,192 11,368 42,235 32,780 41, ,860 1,565 6,323 5,891 5,991 Trego WaKeeney 12,128 11,949 75,846 54,532 62, ,878 1,291 22,516 11,190 14,431 Wallace Sharon Springs 8,611 12,869 36,386 47,500 43, ,504 2,016-7,852 16,761 19

22 Table 5 (Cont.): Property Tax Liabilities for Select Years among 118 Kansas Localities, $1 Million Commercial Property (with 20% Personal Property) Note: The 2005 tax liabilities include the 20% refundable income tax credit for machinery and equipment allowed by Kansas law. Net Property Tax Liability (Median Case) Rank Among Kansas Sample Range of Tax Liability Around Median (+ or -) County City South Central Region Butler El Dorado 13,937 11,919 48,853 41,213 41, ,599 1,492 5,916 7,737 7,204 Chautauqua Sedan 10,710 11,756 70,231 36,872 27, ,543 2,560 38,045 13,618 7,358 Cowley Arkansas City 14,324 13,352 56,503 42,068 44, ,178 3,533 12,563 6,713 6,833 Cowley Winfield 13,504 14,827 60,997 45,086 40, ,939 3,923 13,562 7,195 6,104 Elk Howard 12,504 10,514 56,489 39,344 46, ,615 2,865 13,630 7,156 12,008 Greenwood Eureka 16,740 16,512 74,595 55,930 49, ,620 4,779 25,490 27,269 11,340 Harper Anthony 12,003 13,947 50,964 52,247 51, ,160 5,444 14,839 8,564 12,912 Harvey Newton 13,277 14,064 61,840 37,813 31, ,769 1,412 14,498 6,329 7,820 Kingman Kingman 11,533 10,641 37,334 41,762 47, ,178 2,355 6,419 1,462 10,819 Marion Marion 12,376 14,576 45,881 41,373 49, ,334 4,068 7,181 13,388 6,016 McPherson McPherson 12,581 10,793 49,242 39,268 35, ,472 1,938 11,513 7,979 6,571 Reno Hutchinson 12,086 14,789 45,183 38,505 40, ,133 3,390 8,578 7,682 9,492 Rice Lyons 11,436 13,651 50,712 42,085 50, ,174 2,258 10,593 6,605 6,447 Sedgwick Derby 10,853 11,239 41,335 36,390 35, ,990 2,060 8,294 9,402 6,088 Sedgwick Wichita 12,422 9,528 44,981 34,054 31, ,277 1,746 9,025 8,799 5,286 Sumner Wellington 12,912 16,657 51,740 41,084 48, ,398 3,464 11,974 7,940 12,167 South East Region Allen Iola 13,010 10,892 56,887 37,822 43, ,783 2,009 21,533 5,960 5,287 Anderson Garnett 11,198 10,275 35,780 34,657 41, ,571 1,803 9,149 14,632 12,621 Bourbon Ft. Scott 14,730 13,641 64,881 46,508 41, ,162 1,168 6,884 10,665 6,377 Cherokee Columbus 11,731 10,146 43,012 30,722 36, ,735 2,273 17,991 3,995 8,961 Coffey Burlington 15,878 6,670 32,295 23,786 33, ,131 2,491 11,153 5,694 3,190 Crawford Girard 10,634 10,477 36,346 37,376 36, ,735 2,032 4,121 9,451 4,735 Crawford Pittsburg 11,354 13,966 46,021 36,959 36, ,920 2,709 5,218 9,345 4,725 Labette Oswego 11,431 14,957 46,035 45,620 57, ,055 4,801 8,117 9,686 7,760 Labette Parsons 16,782 13,389 50,624 40,189 49, ,485 4,297 8,926 8,533 6,717 Linn Mound City 12,102 9,926 44,443 30,388 36, ,669 2,463 2,168 6,144 7,941 Montgomery Coffeyville 13,780 23,944 52,211 47,003 46, ,394 6,958 13,845 11,485 8,543 Montgomery Independence 10,282 13,098 49,520 46,432 44, ,533 3,806 13,131 11,345 8,228 Neosho Erie 13,879 12,229 48,486 37,389 36, ,393 3,492 9,185 10,148 8,012 Wilson Fredonia 11,574 13,196 52,579 51,460 47, ,254 3,595 11,368 6,264 2,226 Woodson Yates Center 12,999 13,511 58,591 42,166 46, ,770 2,956 11,369 12,930 4,900 20

23 Table 5 (Cont.): Property Tax Liabilities for Select Years among 118 Kansas Localities, $1 Million Commercial Property (with 20% Personal Property) Note: The 2005 tax liabilities include the 20% refundable income tax credit for machinery and equipment allowed by Kansas law. Net Property Tax Liability (Median Case) Rank Among Kansas Sample Range of Tax Liability Around Median (+ or -) County City South West Region Barber Medicine Lodge 13,376 7,409 45,401 50,986 46, , ,547 8,077 5,910 Barton Great Bend 10,389 11,242 49,702 47,958 37, ,714 6,568 10,803 11,804 11,590 Clark Ashland 10,160 15,767 50,009 55,049 42, ,152 2,905 8,020 3,753 19,057 Comanche Coldwater 17,750 10,760 59,230 56,617 60, ,791 1,629 10,344 9,975 23,764 Edwards Kinsley 17,729 13,953 49,622 52,606 58, ,256 2,397 5,898 7,341 20,697 Finney Garden City 10,487 10,722 40,401 33,200 40, ,343 1,007 4,891 6,819 5,796 Ford Dodge City 12,876 11,259 49,339 47,026 44, ,076 1,532 16,542 7,510 9,548 Grant Ulysses 6,451 8,474 28,879 28,780 24, , ,840 2,421 2,727 Gray Cimmeron 9,177 12,896 40,944 41,001 44, ,645 1,292 23,139 6,589 3,774 Greeley Tribune 11,236 11,741 52,757 50,663 43, ,981 1,316 3,723 7,151 9,300 Hamilton Syracuse 9,642 13,318 38,244 44,282 41, ,784 1, ,297 4,258 Haskell Sublette 6,525 11,479 46,197 38,222 29, ,369 6,974 8,358 3,023 Hodgeman Jetmore 10,350 19,157 50,358 45,382 69, ,827 2,493 15,470 8,875 17,027 Kearny Lakin 9,968 8,539 39,356 37,404 30, ,994 1,286-2,149 2,323 Kiowa Greensburg 17,410 8,645 24,935 41,511 40, ,811 1, ,234 9,323 Lane Dighton 9,362 12,389 43,559 55,018 58, , ,509 9,635 9,036 Meade Meade 11,970 8,825 63,388 62,824 44, ,890 2,642 14,056 9,049 7,195 Morton Elkhart 10,171 7,110 37,827 38,214 32, ,940 1,720 2,372 6,923 4,248 Ness Ness City 11,824 14,254 61,257 50,666 35, ,459 2,468 5,356 12,949 4,773 Pawnee Larned 9,504 13,812 53,701 52,473 55, ,048 2,677 7,162 11,413 24,535 Pratt Pratt 14,881 11,214 41,991 44,022 53, ,470 1,593 10,645 3,900 9,181 Rush LaCrosse 9,602 12,329 62,504 47,776 54, ,649 5,585 19,437 7,531 7,251 Scott Scott City 10,481 10,694 55,262 39,983 55, ,059 2,772 4,421 4,095 19,022 Seward Liberal 11,780 10,840 44,565 31,320 33, ,674 1,923 4,779 4,950 8,205 Stafford St. John 19,959 18,964 51,625 41,559 60, ,876 5,041 19,004 6,724 48,768 Stanton Johnson City 8,070 9,726 34,125 34,371 34, ,959 2,806 1,890 2,817 18,339 Stevens Hugoton 10,130 6,956 23,454 27,633 31, ,038 1,061-4,508 7,944 Wichita Leoti 9,423 16,814 60,244 52,933 49, ,010 4,418 3,012 5,701 11,372 Source: Author s calculation using data from the League of Kansas Municipalities, Kansas Tax Rate and Fiscal Data Book, various editions, and the Kansas Department of Revenue, Division of Property Valuation, Kansas Real Estate Ratio Study," various years. 21

24 Table 6: Property Tax Liabilities for Select Years among 118 Kansas Localities, $1 Million Industrial Property (with 50% Personal Property) Note: The 2005 tax liabilities include the 20% refundable income tax credit for machinery and equipment allowed by Kansas law. Net Property Tax Liability (Median Case) Rank Among Kansas Sample Range of Tax Liability Around Median (+ or -) County City East Central Region Douglas Lawrence 35,921 42,256 54,983 46,519 38, , ,787 3,175 4,096 Franklin Ottawa 40,932 49,300 69,139 48,149 59, ,331 17,003 6,727 8,785 4,262 Johnson Gardner 36,063 48,945 50,780 46,793 44, ,826 1,512 11,638 4,091 5,953 Johnson Leawood 32,991 42,710 33,322 46,036 39, ,670 1,319 7,637 4,025 5,295 Johnson Lenexa 35,171 42,905 36,955 49,195 40, ,780 1,325 8,470 4,301 5,427 Johnson Merriam 36,267 45,896 37,617 47,831 32, ,836 1,418 8,622 4,182 4,345 Johnson Olathe 38,108 43,710 48,872 53,467 42, ,929 1,350 11,201 4,674 5,676 Johnson Overland Park 35,658 44,313 32,881 43,064 35, ,805 1,369 7,536 3,765 4,778 Johnson Praire Village 33,947 48,176 36,868 48,959 33, ,718 1,488 8,450 4,280 4,533 Johnson Shawnee 35,391 44,962 36,685 48,253 38, ,791 1,389 8,408 4,218 5,177 Leavenworth Lansing 32,620 45,416 50,163 36,279 44, ,610 2,750 5,907 6,169 3,385 Leavenworth Leavenworth 41,966 40,244 58,682 42,276 47, ,357 2,437 6,910 7,188 3,649 Miami Paola 35,344 41,214 63,372 47,007 51, ,384 5,685 3,597 9,266 Wyandotte Kansas City 47,518 52,401 62,216 69,562 57, ,522 4,592 8,151 8,576 9,148 North Central Region Chase Cottonwood Falls 30,596 42,533 73,524 53,035 72, ,455 1,071 12,633 13,139 17,477 Clay Clay Center 40,411 44,476 61,536 49,389 65, ,721 7,701 7,714 4,693 10,679 Cloud Concordia 37,109 43,625 85,568 72,967 61, ,087 7,590 11,196 7,226 14,560 Dickinson Abiliene 40,503 39,274 57,058 33,813 47, ,284 3,409 11,090 7,428 9,149 Ellsworth Ellsworth 29,508 36,650 59,166 53,132 68, ,967 2,818 8,671 8,861 17,250 Geary Junction City 33,195 30,512 59,685 51,624 57, ,726 1,586 8,621 5,697 7,557 Jewell Mankato 51,936 57,773 63,608 62,166 59, ,132 6,776 15,276 7,224 6,689 Lincoln Lincoln 32,477 42,016 76,310 70,973 59, ,610 2,891 27,161 10,892 7,918 Lyon Emporia 37,432 44,104 71,430 52,402 54, ,371 3,411 13,935 8,048 5,632 Marshall Marysville 35,889 51,115 71,166 61,884 57, ,094 10,964 9,466 9,730 3,624 Mitchell Beloit 45,834 44,701 66,494 66,002 65, ,081 2,454 22,319 9,880 14,826 Morris Council Grove 35,286 37,025 61,317 55,068 47, ,548 5,534 18,244 7,949 4,225 Ottawa Minneapolis 37,969 37,588 68,188 61,474 56, ,436 2,815 6,450 4,370 11,250 Pottawatomie Westmoreland 34,345 37,712 65,101 35,280 35, ,343 1,898 7,527 3,018 4,294 Republic Belleville 40,149 45,411 67,534 65,856 70, ,845 5,624 12,746 7,210 11,269 Riley Manhattan 42,646 39,057 58,652 52,057 42, ,561 1,295 4,850 2,389 6,135 Saline Salina 38,168 43,924 58,460 35,093 43, ,163 1,713 6,527 6,655 7,298 Wabaunsee Alma 36,093 36,490 52,284 46,961 47, ,754 6,981 5,521 9,734 8,341 Washington Washington 34,558 45,330 70,553 57,593 56, ,332 6,015 18,785 12,265 6,138 22

25 Table 6 (Cont.): Property Tax Liabilities for Select Years among 118 Kansas Localities, $1 Million Industrial Property (with 50% Personal Property) Note: The 2005 tax liabilities include the 20% refundable income tax credit for machinery and equipment allowed by Kansas law. Net Property Tax Liability (Median Case) Rank Among Kansas Sample Range of Tax Liability Around Median (+ or -) County City North East Region Atchison Atchison 44,295 51,592 83,929 51,361 55, ,564 4,920 12,381 10,532 3,539 Brown Hiawatha 40,782 48,636 70,340 49,289 47, ,160 7,407 7,044 3,692 11,861 Doniphan Troy 32,812 50,713 54,124 35,769 45, ,189 2,889 5,144 3,570 5,978 Jackson Holton 39,591 48,451 56,347 55,398 41, ,362 3,589 16,788 3,264 5,692 Jefferson Oskaloosa 43,284 44,733 63,589 57,284 57, ,460 3,238 5,501 5,004 8,055 Nemaha Seneca 36,524 40,547 44,077 37,808 43, ,820 3,731 8,948 4,050 10,661 Osage Lyndon 33,566 44,462 54,395 47,057 52, ,266 8,065 9,726 6,106 2,580 Shawnee Topeka 40,535 55,560 69,128 63,724 51, ,778 2,824 9,033 8,848 5,656 North West Region Cheyenne St. Francis 33,399 38,314 52,664 48,052 37, ,700 3,215 1,575 2,378 5,186 Decatur Oberlin 38,610 33,601 44,747 55,844 63, ,990 2,070 18,217 4,179 6,915 Ellis Hays 32,458 36,107 54,054 52,935 40, , ,650 5,647 2,717 Gove Gove 34,992 56,314 79,399 44,439 33, ,243 2,640 9,066 3,241 10,913 Graham Hill City 31,262 42,056 91,778 72,667 69, ,101 2,074 27,444 3,607 7,722 Logan Oakley 32,517 39,647 77,836 56,785 72, ,713 2,077 7,080 5,950 5,785 Norton Norton 39,623 53,959 86,480 65,813 57, ,892 4,561 14,007 8,661 7,229 Osborne Osborne 40,563 48,998 66,372 62,903 69, ,859 5,358 17,137 9,437 10,138 Phillips Phillipsburg 34,381 41,288 98,265 62,427 66, ,558 12,362 19,841 13,554 13,272 Rawlins Atwood 30,615 45,935 76,440 55,604 51, ,860 3,121 14,188 5,292 7,901 Rooks Stockton 34,425 30,818 59,666 66,544 65, ,485 3,289 4,537 10,502 22,360 Russell Russell 33,658 45,913 50,124 54,166 64, ,460 2,016 9,820 5,047 5,219 Sheridan Hoxie 37,049 61,263 88,151 74,235 53, ,808 22,272 17,743 3,751 Sherman Goodland 40,767 44,400 60,636 52,460 52, ,462 1,307 3,846 5,094 4,915 Smith Smith Center 43,607 56,567 67,326 60,468 98, ,354 14,463 4,833 8,678 20,794 Thomas Colby 29,618 42,448 53,650 46,894 54, ,860 1,565 6,323 5,891 5,991 Trego WaKeeney 35,230 39,506 92,387 71,871 79, ,878 1,291 22,516 11,190 14,431 Wallace Sharon Springs 27,231 40,032 46,726 61,553 57, ,504 2,016-7,852 16,761 23

26 Table 6 (Cont.): Property Tax Liabilities for Select Years among 118 Kansas Localities, $1 Million Industrial Property (with 50% Personal Property) Note: The 2005 tax liabilities include the 20% refundable income tax credit for machinery and equipment allowed by Kansas law. Net Property Tax Liability (Median Case) Rank Among Kansas Sample Range of Tax Liability Around Median (+ or -) County City South Central Region Butler El Dorado 36,692 44,719 62,519 55,474 53, ,599 1,492 5,916 7,737 7,204 Chautauqua Sedan 33,868 47,624 86,077 53,278 42, ,543 2,560 38,045 13,618 7,358 Cowley Arkansas City 38,196 44,632 71,935 58,048 59, ,178 3,533 12,563 6,713 6,833 Cowley Winfield 36,012 49,559 77,657 62,212 53, ,939 3,923 13,562 7,195 6,104 Elk Howard 35,767 35,066 74,980 55,257 61, ,615 2,865 13,630 7,156 12,008 Greenwood Eureka 44,640 57,562 93,963 73,436 64, ,620 4,779 25,490 27,269 11,340 Harper Anthony 33,826 46,193 65,525 70,232 70, ,160 5,444 14,839 8,564 12,912 Harvey Newton 41,983 47,460 78,087 51,988 43, ,769 1,412 14,498 6,329 7,820 Kingman Kingman 32,036 41,879 48,819 55,682 59, ,178 2,355 6,419 1,462 10,819 Marion Marion 35,949 53,485 60,011 55,640 64, ,334 4,068 7,181 13,388 6,016 McPherson McPherson 32,709 39,766 63,566 53,456 47, ,472 1,938 11,513 7,979 6,571 Reno Hutchinson 34,572 49,885 58,064 53,062 53, ,133 3,390 8,578 7,682 9,492 Rice Lyons 32,230 40,551 65,239 56,363 64, ,174 2,258 10,593 6,605 6,447 Sedgwick Derby 31,525 42,710 52,601 48,509 46, ,990 2,060 8,294 9,402 6,088 Sedgwick Wichita 36,084 36,207 57,241 45,396 40, ,277 1,746 9,025 8,799 5,286 Sumner Wellington 40,828 58,666 66,356 57,086 62, ,398 3,464 11,974 7,940 12,167 South East Region Allen Iola 37,214 38,564 72,473 52,654 56, ,783 2,009 21,533 5,960 5,287 Anderson Garnett 32,033 40,343 49,512 50,078 55, ,571 1,803 9,149 14,632 12,621 Bourbon Ft. Scott 39,803 49,609 80,765 62,517 54, ,162 1,168 6,884 10,665 6,377 Cherokee Columbus 33,060 37,717 55,137 40,945 47, ,735 2,273 17,991 3,995 8,961 Coffey Burlington 35,726 25,001 40,340 33,524 41, ,131 2,491 11,153 5,694 3,190 Crawford Girard 34,942 39,017 47,442 50,560 48, ,735 2,032 4,121 9,451 4,735 Crawford Pittsburg 37,306 52,009 60,070 49,996 47, ,920 2,709 5,218 9,345 4,725 Labette Oswego 32,215 55,313 62,493 63,759 73, ,055 4,801 8,117 9,686 7,760 Labette Parsons 47,296 49,514 68,723 56,169 63, ,485 4,297 8,926 8,533 6,717 Linn Mound City 38,270 40,233 57,141 41,811 47, ,669 2,463 2,168 6,144 7,941 Montgomery Coffeyville 42,792 85,835 69,092 63,409 60, ,394 6,958 13,845 11,485 8,543 Montgomery Independence 31,927 46,955 65,531 62,639 58, ,533 3,806 13,131 11,345 8,228 Neosho Erie 38,015 44,969 63,558 51,578 51, ,393 3,492 9,185 10,148 8,012 Wilson Fredonia 30,865 45,570 66,866 67,380 61, ,254 3,595 11,368 6,264 2,226 Woodson Yates Center 37,758 46,184 74,895 58,447 61, ,770 2,956 11,369 12,930 4,900 24

27 Table 6 (Cont.): Property Tax Liabilities for Select Years among 118 Kansas Localities, $1 Million Industrial Property (with 50% Personal Property) Note: The 2005 tax liabilities include the 20% refundable income tax credit for machinery and equipment allowed by Kansas law. Net Property Tax Liability (Median Case) Rank Among Kansas Sample Range of Tax Liability Around Median (+ or -) County City South West Region Barber Medicine Lodge 37,696 30,456 58,132 67,032 61, , ,547 8,077 5,910 Barton Great Bend 30,659 42,277 63,404 64,654 50, ,714 6,568 10,803 11,804 11,590 Clark Ashland 29,062 45,920 65,472 73,600 60, ,152 2,905 8,020 3,753 19,057 Comanche Coldwater 42,232 34,215 76,524 75,744 76, ,791 1,629 10,344 9,975 23,764 Edwards Kinsley 39,550 46,037 64,435 69,896 74, ,256 2,397 5,898 7,341 20,697 Finney Garden City 30,949 37,679 53,701 45,693 51, ,343 1,007 4,891 6,819 5,796 Ford Dodge City 35,768 42,148 62,464 62,846 58, ,076 1,532 16,542 7,510 9,548 Grant Ulysses 21,197 28,905 37,277 38,870 33, , ,840 2,421 2,727 Gray Cimmeron 29,021 42,784 52,555 54,367 58, ,645 1,292 23,139 6,589 3,774 Greeley Tribune 28,860 38,677 67,470 66,862 59, ,981 1,316 3,723 7,151 9,300 Hamilton Syracuse 28,926 40,054 49,379 57,907 54, ,784 1, ,297 4,258 Haskell Sublette 22,343 42,273 58,524 49,623 40, ,369 6,974 8,358 3,023 Hodgeman Jetmore 29,605 51,924 65,654 64,571 87, ,827 2,493 15,470 8,875 17,027 Kearny Lakin 29,905 30,807 48,868 49,924 39, ,994 1,286-2,149 2,323 Kiowa Greensburg 35,040 26,921 34,775 54,989 54, ,811 1, ,234 9,323 Lane Dighton 29,603 35,710 60,239 74,580 74, , ,509 9,635 9,036 Meade Meade 34,240 34,313 78,648 80,748 58, ,890 2,642 14,056 9,049 7,195 Morton Elkhart 28,663 28,381 49,037 50,541 44, ,940 1,720 2,372 6,923 4,248 Ness Ness City 31,130 46,529 75,010 67,639 48, ,459 2,468 5,356 12,949 4,773 Pawnee Larned 30,053 46,934 67,358 71,281 71, ,048 2,677 7,162 11,413 24,535 Pratt Pratt 36,525 39,874 57,026 59,176 70, ,470 1,593 10,645 3,900 9,181 Rush LaCrosse 29,299 43,008 80,362 68,020 71, ,649 5,585 19,437 7,531 7,251 Scott Scott City 33,141 40,082 69,675 53,903 70, ,059 2,772 4,421 4,095 19,022 Seward Liberal 36,579 39,726 57,291 43,447 44, ,674 1,923 4,779 4,950 8,205 Stafford St. John 43,441 54,328 68,434 58,099 76, ,876 5,041 19,004 6,724 48,768 Stanton Johnson City 23,442 32,317 43,779 45,631 44, ,959 2,806 1,890 2,817 18,339 Stevens Hugoton 26,669 24,876 29,933 36,898 40, ,038 1,061-4,508 7,944 Wichita Leoti 28,753 53,042 76,875 71,092 66, ,010 4,418 3,012 5,701 11,372 Source: Author s calculation using data from the League of Kansas Municipalities, Kansas Tax Rate and Fiscal Data Book, various editions, and the Kansas Department of Revenue, Division of Property Valuation, Kansas Real Estate Ratio Study," various years. 25

28 Table 7: Breakdown of Major Components of Total Mill Levy for Select Years, 118 Kansas Localities, Percent Share Note: Typically, values will not add to 100 percent because of special district levies. In rare cases, values will total more than 100 percent because of unique programs. The 1995 and 2005 School Mills include the state levy. City Mills Share of Total Mills County Mills Share of Total Mills School Mills Share of Total Mills County City East Central Region Douglas Lawrence Franklin Ottawa Johnson Gardner Johnson Leawood Johnson Lenexa Johnson Merriam Johnson Olathe Johnson Overland Park Johnson Praire Village Johnson Shawnee Leavenworth Lansing Leavenworth Leavenworth Miami Paola Wyandotte Kansas City North Central Region Chase Cottonwood Falls Clay Clay Center Cloud Concordia Dickinson Abiliene Ellsworth Ellsworth Geary Junction City Jewell Mankato Lincoln Lincoln Lyon Emporia Marshall Marysville Mitchell Beloit Morris Council Grove Ottawa Minneapolis Pottawatomie Westmoreland Republic Belleville Riley Manhattan Saline Salina Wabaunsee Alma Washington Washington

29 Table 7 (Cont.): Breakdown of Major Components of Total Mill Levy for Select Years, 118 Kansas Localities, Percent Share Note: Typically, values will not add to 100 percent because of special district levies. In rare cases, values will total more than 100 percent because of unique programs. The 1995 and 2005 School Mills include the state levy. City Mills Share of Total Mills County Mills Share of Total Mills School Mills Share of Total Mills County City North East Region Atchison Atchison Brown Hiawatha Doniphan Troy Jackson Holton Jefferson Oskaloosa Nemaha Seneca Osage Lyndon Shawnee Topeka North West Region Cheyenne St. Francis Decatur Oberlin Ellis Hays Gove Gove Graham Hill City Logan Oakley Norton Norton Osborne Osborne Phillips Phillipsburg Rawlins Atwood Rooks Stockton Russell Russell Sheridan Hoxie Sherman Goodland Smith Smith Center Thomas Colby Trego WaKeeney Wallace Sharon Springs

30 Table 7 (Cont.): Breakdown of Major Components of Total Mill Levy for Select Years, 118 Kansas Localities, Percent Share Note: Typically, values will not add to 100 percent because of special district levies. In rare cases, values will total more than 100 percent because of unique programs. The 1995 and 2005 School Mills include the state levy. City Mills Share of Total Mills County Mills Share of Total Mills School Mills Share of Total Mills County City South Central Region Butler El Dorado Chautauqua Sedan Cowley Arkansas City Cowley Winfield Elk Howard Greenwood Eureka Harper Anthony Harvey Newton Kingman Kingman Marion Marion McPherson McPherson Reno Hutchinson Rice Lyons Sedgwick Derby Sedgwick Wichita Sumner Wellington South East Region Allen Iola Anderson Garnett Bourbon Ft. Scott Cherokee Columbus Coffey Burlington Crawford Girard Crawford Pittsburg Labette Oswego Labette Parsons Linn Mound City Montgomery Coffeyville Montgomery Independence Neosho Erie Wilson Fredonia Woodson Yates Center

31 Table 7 (Cont.): Breakdown of Major Components of Total Mill Levy for Select Years, 118 Kansas Localities, Percent Share Note: Typically, values will not add to 100 percent because of special district levies. In rare cases, values will total more than 100 percent because of unique programs. The 1995 and 2005 School Mills include the state levy. City Mills Share of Total Mills County Mills Share of Total Mills School Mills Share of Total Mills County City South West Region Barber Medicine Lodge Barton Great Bend Clark Ashland Comanche Coldwater Edwards Kinsley Finney Garden City Ford Dodge City Grant Ulysses Gray Cimmeron Greeley Tribune Hamilton Syracuse Haskell Sublette Hodgeman Jetmore Kearny Lakin Kiowa Greensburg Lane Dighton Meade Meade Morton Elkhart Ness Ness City Pawnee Larned Pratt Pratt Rush LaCrosse Scott Scott City Seward Liberal Stafford St. John Stanton Johnson City Stevens Hugoton Wichita Leoti Source: Author s calculation using data from the League of Kansas Municipalities, Kansas Tax Rate and Fiscal Data Book, various editions. 29

32 Table 8: Ratio of Effective Tax Rates, $1 Million Commercial Property to $150,000 Homestead, Real Property Only, Select Years, 118 Kansas Localities Commercial-to-Homestead Ratios Rank Among Kansas Sample County City East Central Region Douglas Lawrence Franklin Ottawa Johnson Gardner Johnson Leawood Johnson Lenexa Johnson Merriam Johnson Olathe Johnson Overland Park Johnson Praire Village Johnson Shawnee Leavenworth Lansing Leavenworth Leavenworth Miami Paola Wyandotte Kansas City North Central Region Chase Cottonwood Falls Clay Clay Center Cloud Concordia Dickinson Abiliene Ellsworth Ellsworth Geary Junction City Jewell Mankato Lincoln Lincoln Lyon Emporia Marshall Marysville Mitchell Beloit Morris Council Grove Ottawa Minneapolis Pottawatomie Westmoreland Republic Belleville Riley Manhattan Saline Salina Wabaunsee Alma Washington Washington North East Region Atchison Atchison Brown Hiawatha Doniphan Troy Jackson Holton Jefferson Oskaloosa Nemaha Seneca Osage Lyndon Shawnee Topeka North West Region Cheyenne St. Francis Decatur Oberlin Ellis Hays Gove Gove Graham Hill City Logan Oakley Norton Norton Osborne Osborne Phillips Phillipsburg Rawlins Atwood Rooks Stockton Russell Russell Sheridan Hoxie Sherman Goodland Smith Smith Center Thomas Colby Trego WaKeeney Wallace Sharon Springs

33 Table 8 (Cont.): Ratio of Effective Tax Rates, $1 Million Commercial Property to $150,000 Homestead, Real Property Only, Select Years, 118 Kansas Localities Commercial-to-Homestead Ratios Rank Among Kansas Sample County City South Central Region Butler El Dorado Chautauqua Sedan Cowley Arkansas City Cowley Winfield Elk Howard Greenwood Eureka Harper Anthony Harvey Newton Kingman Kingman Marion Marion McPherson McPherson Reno Hutchinson Rice Lyons Sedgwick Derby Sedgwick Wichita Sumner Wellington South East Region Allen Iola Anderson Garnett Bourbon Ft. Scott Cherokee Columbus Coffey Burlington Crawford Girard Crawford Pittsburg Labette Oswego Labette Parsons Linn Mound City Montgomery Coffeyville Montgomery Independence Neosho Erie Wilson Fredonia Woodson Yates Center South West Region Barber Medicine Lodge Barton Great Bend Clark Ashland Comanche Coldwater Edwards Kinsley Finney Garden City Ford Dodge City Grant Ulysses Gray Cimmeron Greeley Tribune Hamilton Syracuse Haskell Sublette Hodgeman Jetmore Kearny Lakin Kiowa Greensburg Lane Dighton Meade Meade Morton Elkhart Ness Ness City Pawnee Larned Pratt Pratt Rush LaCrosse Scott Scott City Seward Liberal Stafford St. John Stanton Johnson City Stevens Hugoton Wichita Leoti Source: Author s calculation using data from the League of Kansas Municipalities, Kansas Tax Rate and Fiscal Data Book, various editions, and the Kansas Department of Revenue, Division of Property Valuation, Kansas Real Estate Ratio Study," various years. 31

34 APPENDIX The Appendix offers an exact reprint of the Methodology section published in the April 2006 edition of the 50-State Property Tax Comparison Study produced by the Minnesota Taxpayers Association and distributed by the member states of the National Taxpayers Conference. It also provides a list of the urban and rural localities used in that study for comparison. The study is available for purchase at: 32

35 Appendix: Methodology and Assumptions This study updates the 50-State Property Tax Comparison Study: Payable Year Included are four distinct classes of property using a standard set of assumptions about their true market values and the split between real and personal property. The tax was calculated for variouslyvalued parcels in the largest urban area of each state and the District of Columbia, for the largest fifty cities in the United States, and for a typical rural area in each state. Additional large cities were added to the urban comparison when the largest city was considered not to be typical. More specific details about key assumptions are provided in the sections below. Data Collection Data for property tax calculations was collected in one of two ways. Where possible, property tax data was collected directly from information available through various state and local websites. Where such reports were not available, property taxes were calculated using a contact-verification approach in which state and local tax experts were asked to provide information. In both cases, this information served as the basis for calculations by the Minnesota Taxpayers Association staff. Those calculations were, in turn, subject to local verification when necessary. Previous research provided contact names of each state s property tax expert, usually a state or local government employee, who would assist us in calculating the property tax and verify background information about their property tax system. Components of the Property Tax Calculation As an aid in reviewing the remaining assumptions of this study, it is helpful to think of the property tax calculation as having five distinct components: (1) a true market value (TMV), (2) a local sales ratio (SR), (3) a statutory classification system (classification rate) or other provisions that effectively determine the proportion of the assessor s estimated market value that is taxable (CR), (4) the total local property tax rate (TR), and (5) applicable property tax credits (C). Accordingly, the net local property tax for a given parcel of property is written: Net Property Tax = TMV x SR x CR x TR C Assumptions about each component are discussed in the sections below. True Market Value (TMV) It is important to note that the calculations for this study start with an assumption about the true market value of the four classes of property. This is the market value of a parcel of property as determined in the local real estate market consisting of arm-length transactions between willing buyers and sellers. This is in contrast to assessed value or estimated market value, which, in most states is the starting point for the tax calculation. This study assumes the true market value of each property type is the same for each state. For example, the ranking of property taxes on a residential homestead parcel with a true market value of $150,000 assumes that the parcel is actually worth $150,000 in the local real estate market in each location in each state, regardless of what the local assessor may think the property is worth. In the cases of some locations the assumed true market value may be very atypical (a $150,000 home in Boston, for example). Nevertheless, this study assumes the property exists there. Essentially the goal of this study is to compare the effects of property tax structures. By fixing values we are able to observe the isolated effects of tax structures. That is, we are comparing 33

36 property taxes, not local real estate markets. However, we have added a table showing median values for single-family homes in the largest urban area of each state. The specific market value assumed for each class of property in this report is described below in the section on property classes. Sales Ratios (SR) A unique aspect of this study is the inclusion of the effects of assessment practices on relative tax burdens across the country. It would have been much simpler to start the calculations by fixing the assessor s estimated market value for each property. This would have resulted in a comparison of only the statutory property tax structure. However, in every state, the quality of property tax assessments is a significant aspect of the local property tax scene. Omission of this aspect of the property tax calculation would have made this study much less useful. Sales ratios are simply a measure of the quality of assessments. The sales ratio is determined by comparing assessments to actual sales. If a sales ratio is: above 100%, the property is over assessed, below 100%, the property is under assessed, is 100%, assessments and market values are equal. If the sales ratios are at 100% that generally indicates that reassessments have just occurred. In some states, sales ratios are used to adjust assessor s values for use in state aid formulas that use local property wealth as a measure of local fiscal capacity. Sales ratios are generally not used in calculating an individual s actual property tax bill; however, some states use an equalization factor for calculating property tax bills, a factor that equalizes assessment values to market values. In order for the tax liabilities to represent the actual experience of property owners, and to compare effective property tax rates across the states, it was important to use the true market value as a point of reference. We attempted to adjust the assumed true market value of our sample properties with the use of sales ratios applicable to the location and type of property being studied. These are normally county-level sales ratios for the specific classes of property. Where location and class specific ratios were not available, we tried to use the ratio most applicable to the property (either a statewide ratio for the class, or in some cases, a county ratio applicable to all property classes). By applying sales ratios, this study recognizes that our $150,000 residential homestead may be on the books at $155,000 in one location, and $140,000 in another, and that the actual tax on the property will be based on these estimates of market value. In this study, if the relevant sales ratio in a given location is 93%, we convert the $150,000 true market value to $139,500 ($150,000 x.93) before applying the provisions of the local property tax. It is important that we use sales ratios in this study because our fixed reference point for all calculations is an assumed true market value. In the case of personal property, sales ratios are not used. Many states do not have sales ratios for personal property or assume they are 100%. Personal property assessments are often not marketbased, but based on depreciation schedules and other accounting techniques. Consequently, we simply set the assessment value of personal property by assumption, side-stepping the myriad ways a state might arrive at that number. Classification Rates (CR) The third component of the property tax calculation involves subjecting the assessor s estimated market value to provisions designed to affect the distribution of property tax levies, namely statutory classification or differential assessment schemes. 34

37 In the absence of classification or differential assessments, the distribution of property tax burdens by class of property will reflect the distribution of the assessor s estimated market values, assuming the properties are located in the same set of taxing jurisdictions. That is, a home assessed at $100,000 and a business with the same assessment would pay identical property taxes and their effective tax rates (tax as a percent of assessed value) would be the same. In most states, classification schemes are set by state legislatures. In a few states classification is partly determined by local governments. Because of the wide variation in the quality of assessments across the states, particularly across classes of property, many states that appear to have no classification scheme may in fact have significant classification via uneven assessments across classes of property, in some cases, perhaps, in violation of state constitution uniformity provision. Some states, like Minnesota, enforces strict standards of assessment quality (sales ratio studies, state orders adjusting values, state certification of assessors, etc.) and put their classification policy in statute. Total Local Tax Rate (TR) Tax rates requested were state and local, payable 2005 applicable to the greatest number of parcels in the largest urban area of each state. Payable 2005 tax rate was defined as the tax rate used to calculated the property taxes with a lien date originating in 2005, regardless of the date(s) on which payments are due. In any one city, there may be many different taxing jurisdictions, essentially intersections of city, county, school district, and special taxing district. We asked for the local tax rates for the intersection with the largest number of properties. We were careful to include the tax rate for all taxing jurisdictions that normally levy against real and personal property (namely, cities, counties, school districts, and special taxing districts). Special assessments were excluded from this study since they are more in the nature of user charges, do not affect a majority of parcels, and are usually not sources of general revenue. Credits (C) The final step in the tax calculation is to recognize any general deductions from the gross property tax calculations (credits), but these are rare. More common are circuit-breaker refunds which provide homestead reductions based on the gross tax of the property and property owner s income. In our homestead examples we allowed for the effects of circuit-breakers assuming the homeowner has income from wages only of $40,000 and $80,000 for the $70,000 and $150,000 homes, respectively. However, we found no state circuit-breaker program that provided relief in our homestead examples. Any other credits that apply to a majority of parcels of the specified type were included in our calculations. Property Classes and True Market Values The four hypothetical properties studied in this report are (1) residential homesteads, (2) commercial property, (3) industrial property, and (4) apartments. These classes of property were selected to provide information about certain recurring property tax reform themes in the State of Minnesota, namely the tax on homesteads relative to those on business and apartment property. Other classes of property were omitted either because of their complexity (public utilities, farms), or because the need for information about them was less urgent, at least in Minnesota. The four classes of property studied comprise nearly 80% of all the market value of real and personal property in Minnesota. For the homestead property, we assumed two different values of real property, a low value and a high value. Apartment property consists of only one value. This updated study added a third 35

38 value of $25 million for commercial and industrial property. All classes of property contained a corresponding set of assumptions about personal property. While this may seem an unnecessary complication to many readers, note that the Minnesota property tax system includes tiered classifications based on value (similar to income tax brackets). In Minnesota, the first $500,000 of estimated market value of a residential home is taxed at 80% the rate applicable to the value over $500,000. Business value over $150,000 is taxed about 1.4 times more heavily than value under $150,000. Taxes were calculated for the four classes of property in the largest urban area of each state and the District of Columbia, plus the additional cities requested by participating member NTC states. The following table summarizes the property classes and assumed true market values (and assessed value of personal property) used for each class. PROPERTY CLASSES AND TRUE MARKET VALUES Values of Property Class Real Mach. & Equip. Inventories Fixtures Total Homestead $150,000 $300,000 $0 $0 $0 $0 $0 $0 $150,000 $300,000 Apartments $600,000 $0 $0 $30,000 $630,000 Commercial $100,000 $1,000,000 $25,000,000 $0 $0 $0 $0 $0 $0 $20,000 $200,000 $5,000,000 $120,000 $1,200,000 $30,000,000 Industrial (50% Personal) Industrial (60% Personal) $100,000 $1,000,000 $25,000,000 $100,000 $1,000,000 $25,000,000 $50,000 $500,000 $12,500,000 $75,000 $750,000 $18,750, $40,000 $400,000 $10,000,000 $60,000 $600,000 $15,000,000 $10,000 $100,000 $2,500,00 $15,000 $150,000 $3,750,000 $200,000 $2,000,000 $50,000,000 $250,000 $2,500,000 $62,500,000 Real and Personal Property The treatment of personal property is a significant part of the property tax in every state. To get an appropriate ranking of the property taxes on all classes of property, and particularly personal property, it is important to make specific assumptions about the amount of personal property associated with each example. As the table above shows, we made specific assumptions about the amount of personal property associated with each property example. We define the types of property as follows: Real Property Property consisting of land and buildings not classified as personal property for tax purposes. Personal Property Machinery and Equipment Large and ponderous equipment, generally not portable and often mounted on special foundations. It would include such items as large printing presses and assembly robots. Personal Property Inventories This includes raw materials, unfinished products, supplies and similar items. Personal Property Fixtures Fixtures include such items as home or office furnishings, display racks, tools and similar items, but excluding motor vehicles. In the case of apartments, it would include such things as stoves, refrigerators, garbage disposals, air conditioners, drapes, and lawn care equipment. The specific mix of real and personal property obviously varies by industry and location. Since some states tax most personal property and other states exempt all personal property, the tax rankings, particularly for the industrial example, are sensitive to the assumed mix of values.

39 In the body of this report, we present industrial rankings based on a 50% - 50% and 40% - 60% mix of real and personal property value, respectively. This study does not include intangibles such as bank balances or financial securities in the property tax calculations. Effective Tax Rates (ETRs) Repeated reference has already been made to the concept of effective tax rates. In contrast to statutory tax rates that generally apply to taxable values, in this study effective tax rates are used to express the relationship between net property taxes and the true market value of the property. By including the effects of all statutory tax provisions as well as the effects of local assessment practices, effective tax rates have the virtue of allowing more meaningful comparisons across states and property types. The comparison tables included in this report show actual dollar taxes and effective tax rates ranked from highest to lowest as well as alphabetically. Special Property Tax Provisions This study excludes all special property tax provisions. These are defined as provisions that, in practice, apply to less than half of all taxpayers for a given class of property. Special provisions are normally triggered by special circumstances or attributes of the taxpayer or property. Examples would include senior tax deferrals, and special valuation exclusions based on age, health or special use. The goal of this study is to compare the actual tax experience of the largest number of taxpayers in the selected jurisdictions. What Do Rankings Mean? Property tax rankings must be evaluated in the broader context of each state s fiscal system. The level of property taxes in each state reflects the level of local spending there, intergovernmental aids paid to local governments, the relative use of non-property tax sources of financing public services such as local income or sales taxes and fees, for selected classes of property, state and local policies that affect the distribution of the property tax burden across properties. 37

40 List of Localities Studied in the 50-State Property Tax Comparison Study State Urban Rural Alabama Birmingham Millbrook Alaska Anchorage Fairbanks Arizona Phoenix Winslow Arkansas Little Rock Jonesboro California Los Angeles Red Bluff Colorado Denver Walsenburg Connecticut Bridgeport Windham Delaware Wilmington Smyrna District of Columbia Washington n/a Florida Jacksonville Moore Haven Georgia Atlanta Fitzgerald Hawaii Honolulu Kauai Idaho Boise Saint Anthony Illinois Chicago, Aurora Carlinville Indiana Indianapolis North Vernon Iowa Des Moines Hampton Kansas Wichita Larned Kentucky Louisville Lawrenceburg Louisiana New Orleans Natchitoches Maine Portland Hudson Maryland Baltimore City Hampstead Massachusetts Boston Holliston Michigan Detroit Escanaba Minnesota Minneapolis Glencoe Mississippi Jackson Tylertown Missouri Kansas City Boonville Montana Billings Dillon Nebraska Omaha Mullen Nevada Las Vegas Fallon New Hampshire Manchester Auburn New Jersey Newark Maurice River Township New Mexico Albuquerque Clayton New York New York City, Buffalo Plattsburgh North Carolina Charlotte Asheboro North Dakota Fargo Bottineau Ohio Columbus Marion Oklahoma Oklahoma City Hollis Oregon Portland Coos Bay Pennsylvania Philadelphia Williamsport Rhode Island Providence Hopkinton South Carolina Columbia Mullins South Dakota Sioux Falls Sisseton Tennessee Memphis Savannah Texas Houston Fort Stockton Utah Salt Lake City Richfield Vermont Burlington Morristown Virginia Virginia Beach Lynchburg Washington Seattle Rock Island West Virginia Charleston Parsons Wisconsin Milwaukee Mayville Wyoming Cheyenne Lovell 38

41 KANSAS, INC. Created by the Legislature in 1986, Kansas, Inc. is an independent, objective, and non-partisan organization designed to conduct economic development research and analysis with the goal of crafting policies and recommendations to insure the state s ongoing competitiveness for economic growth. To attain our mission, Kansas, Inc. undertakes four primary activities: 1) Developing and implementing a proactive and aggressive research agenda; 2) Identifying and promoting strategies and policies from the research; 3) Conducting evaluation reviews and oversight of economic development programs; and 4) Collaboration and outreach with economic development entities and potential partners. Co-Chaired by the Governor, Kansas, Inc. is governed by a 17-member Board of Directors. Board members, as mandated by legislation, include four members of Legislative leadership, a representative from the Board of Regents, the Secretary of Commerce, the Commanding General of the Kansas Cavalry, a representative from labor, and eight other members from the private sector representing key Kansas industrial sectors. Private sector members are appointed by the Governor and confirmed by the Kansas Senate. Through analysis and open dialogue, Kansas, Inc. identifies policy options and builds the consensus essential for concerted action on vital economic issues. Kansas, Inc. is designed to be a public-private partnership with expectations that state investments are leveraged with other funds to maintain a strong research portfolio. BOARD OF DIRECTORS Governor Kathleen Sebelius Topeka Gene Argo American Rodeo Company, Hays Secretary Howard Fricke Kansas Department of Commerce, Topeka Donna Johnson Pinnacle Technology, Lawrence Wil Leiker AFL-CIO, Topeka Sen. Stephen Morris Senate President, Hugoton Reginald Robinson Kansas Board of Regents, Topeka Stephen L. Waite Kansas Calvary, El Dorado CO-CHAIRS MEMBERS Patti Bossert Key Staffing, Topeka Rep. Tom Burroughs State Representative, Kansas City Rep. Lana Gordon State Representative, Topeka Sen. Laura Kelly State Senator, Topeka Lawrence L. McCants First National Bank, Goodland John Pilla Spirit AeroSystems, Wichita Donald P. Schnacke Donald P. Schnacke, P.A., Topeka Debby Fitzhugh Director of Operations KANSAS, INC. STAFF Stan R. Ahlerich President Daniel Korber Sr. Research Analyst Fiscal Year 2005 Grants and Loans Report 1

42 632 SW Van Buren, Suite 100 Topeka, KS (785) (785) (fax) University of Kansas School of Business Summerfield Hall, 1300 Sunnyside Avenue Lawrence, KS (785)